ACRA-SGX-SID AUDIT COMMITTEE SEMINAR 2019 - The Audit Committee in the New Normal
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
ACRA-SGX-SID
AUDIT COMMITTEE SEMINAR 2019
[The Audit Committee in the New Normal]
16 January 2019
Marina Mandarin Hotel
© SID 2019 1
ACRA Regulatory Updates
Ms Bong Yap Kim
Divisional Director, Financial Reporting Division,
ACRA
© SID 2019 2
Agenda
1. Tips to ACs when dealing with:
- modified audit reports
- new business arrangements
2. New legislation effective 20 Apr 2018
- voluntary revision of defective accounts
© SID 2019 3Modified audit reports
© SID 2019 4Director’s duties for financial reporting
s201 of Companies Act - Directors must table
Shareholders FS should receive
financial statements (FS) that are:
rely on financial “clean” audit
• true and fair, and
statements report
• comply with the accounting standards
FS of SG-listed companies Areas qualified by auditors
FY2016 FY2017 • Opening balance only: 8 ACs to enquire
(FY2016: 2) before changing
Clean opinion 537 516 auditors
• Going concern only: 6
Modified opinion 40 (7%) 44 (8%) (FY2016: 2)
Total companies 577 560 • Others: 30 (23 may have ACs could help
accounting issues) resolve some issues.
See next slides
© SID 2019 5Case 1 - Changes in views
Clean audit Clean audit Qualified Clean audit
opinion opinion audit opinion opinion
Tip #1 - Critically
FY14 FY15 FY16 FY17 assess before
Loss Loss Profit Loss accepting
changes in views
Qualified Auditor’s Report Restated the comparative
“The Group’s PPE of $20 million, by impairing PPE of $2 million
included equipment not in use “.. The plant and equipment
of about $2 million. We were was not in use since 2016 and
Pre-tax losses for 3 should have been impaired in
unable to obtain sufficient Tip #2 –
consecutive years appropriate audit evidence on 2016...”
+ placed under confident that … will be able Key assumption used: FY16?
“watch list” to fully utilise the PPE • Gross margin: 12% (FY16: 20%)
including those currently not
in use.”
© SID 2019 6Case 2 - Rectify timely
Qualified Qualified
Disclaimer 2months later
opinion opinion
FY15 FY16 Q1’FY17 FY17
Net Assets = $2.1m FY16 (restated) Net Tip #2 – FY16 (restated) Net
Liabilities = ($2.1m) Why error not Assets = $3.1m
Auditor’s Auditor’s Report Announcement identified last Notes to FS
Report 3rd area qualified - “A “The restatement of the year? “During the financial year,
Due to 2 subsidiary did not Company’s …. followed the Group raised prior year
areas translate its PPE into the an adoption of audit adjustments for correction
Group’s presentation opinion…” of the below error: .. The
currency using the changes in fair values of
closing rate as required Tip #1 – Rectify the interest-free loans in
by FRS 21. in FS as far as relation to the changes in
Had it been translated, possible Tip #3 – time to maturity were also
net assets would not accounted ….”.
Analyse the
decrease by $4.2m…” root cause Auditor’s Report
4 areas were qualified (of
Net Liabilities ($2.1m) which 2 were from FY15).
© SID 2019 7New business arrangements
© SID 2019 8Case 3 - Evidence on change in use (1)
Fact Pattern Accounting Requirements
(Para 57 of SFRS 40)
FS Measure • An entity shall transfer a property
Type of Property Business model Classification ment to, or from, IP when, and only
Residential only Sell Development Cost when, there is a change in use.
and residential- Property
commercial • A change in use occurs when the
developments property meets, or ceases to meet,
Industrial Rent Investment Fair the definition of IP and there is
properties Property (IP) value evidence of the change in use.
• In isolation, a change in
Industrial Own use Property, Cost management’s intention for the use
properties Plant and of the property does NOT provide
Equipment evidence of a change in use.
© SID 2019 9Case 3 - Evidence on change in use (2)
Fact Pattern Tip #2 – Be
Property under construction
comfortable
with reasons
for multiple
3 months transfers in a
1 Jan 30 Sept 31 Dec short period
8-storey of time
industrial Rent/Capital
building Sell
Own use appreciation
(Development
(PPE at (Investment
property at
cost) property at
cost)
Tip #1 – Ask fair value)
CFO for the Had it been transferred Fair Value Gain
alternative directly from PPE to IP, (~50% of PBT)
accounting fair value gain taken to
treatment EQUITY
© SID 2019 10Case 3 - Evidence on change in use (3)
Company’s evidence on change in use
Tip #3 – Distinguish
• Management meeting in Sept attended by executive directors, the between change in
CFO and the Finance Manager: intention and change
(i) One director suggested selling the property under construction
in use
for better cash flow management.
(ii) The management decided that if the sale was unsuccessful in 3
months, the property will be held for rental income.
• 2 emails with sale agents provided by management as evidence
on the efforts to sell: Tip #4 – Assess
evidence on the
(i) “…Is it for sale or lease? If sale, what is the price and if leasing change in use (e.g.
what is the rate?” under construction,
(ii) “…We can consider to sell…can your buyer sign the NDA before able to sell in 3
we release information e.g. valuation report etc…” months)?
© SID 2019 11Voluntary Revision of Defective FS
© SID 2019 12Voluntary Revision of Defective FS (1)
Issued Regulations to operationalise s202A and s202B of Companies Act
Purpose: Allow diligent directors to revise the company’s FS on their own1
Can revise in respect No need to deal with No need to call for
of any financial year, subsequent events or changes AGM/EGM to table revised
but in Accounting Standards FS (table at the next
AGM/EGM), but
revisions are confined New directors’ statement and must circulate to members
to non-compliances amended auditor’s report and file with ACRA within
with Companies Act (illustrated in the Guidance) 30 days after revision
Issued Guidance for Companies2 (available at www.acra.gov.sg)
1 Intent of the Steering Committee appointed by MOF to review the Companies Act then.
2 Consulted with ISCA’s Financial Statements Review Committee and ISCA’s Auditing and Assurance Standards Committee.
© SID 2019 13Voluntary Revision of Defective FS (2)
Assume that directors authorised FY2016 FS on 31 Mar 2017 and revised it on 20 Nov 2018.
Extract of new Directors’ Statement:
No need to update for subsequent events
© SID 2019 14Voluntary Revision of Defective FS (3)
New opinion by directors in office at date of revision
Opinion of directors in office at date of original FS
Date of revision
© SID 2019 15Voluntary Revision of Defective FS (4)
Made adjustment to
FY2016 comparatives Should the Co voluntarily revise its FY2016 FS
in FY2017 FS under section 202A as well?
30 Apr 2018
As a minimum, directors to consider the following factors, when
deciding whether to voluntarily revise its FY2016 FS:
(a) nature and materiality of errors (both quantitatively and
1 Feb 2018 qualitatively) in FY2016 FS
(b) level of public interest in FY2016 FS
Noted an error
(c) likelihood of users relying on the defective FY2016 FS that is
in FY2016 FS
available in the public domain (SGXNET and ACRA’s register)
when
preparing
FY2017 FS
© SID 2019 16Thank You! © SID 2019 17
You can also read
